Sunday, March 12, 2017

For the period between April 2016 and January 2017, 61.79 million transactions took place on e-commerce websites using RuPay cards. The value of these transactions stood at Rs 4,139 crore. Meanwhile, RuPay card usage at POS terminals for the time period stood at 139.26 million transactions and the value of these stood was Rs 21,227 crore.

Predictably, RuPay card usage at e-commerce sites and POS machines shot up during demonetization period. In December 2016, RuPay saw 11.97 million transactions at online sites with a value of Rs 1,095 crore. POS machine transactions with RuPay cards stood at 47.27 million with the value of the transactions at Rs 7,005 crore.

To give context, for the full financial year 2015-16, e-commerce transactions on the card network stood at 10.24 million transactions with a value of Rs 576 crore.

Note that despite accounting for more than 40% of debit cards issued in the country, RuPay’s usage at online sites and POS machines is low. That can be attributed to the fact that a majority of debit cards issued were from the Jan Dhan Yojana financial inclusion programme.

From MediaNama’s interview with National Payments Corporation of India (NPCI) CEO and MD in may 2016:

“On POS and e-commerce, we have not grown our share significantly. The market share for them is still bout 5-6% because the bulk of our cards are Jan Dhan Yojana cards. The mainstream cards are about 85 million and the Jan Dhan cards are about 180 million. And most of the e-commerce and POS transactions are from mainstream cards.”

However, it is worth noting that the average ticket size of transactions of RuPay cards at ATMs and POS terminals is comparable to the ticket sizes of all debit cards issued. From an April 2016 report from JM Financial, at ATMs, RuPay’s transaction size was Rs 3,045 while at POS terminals, the ticket size was Rs 1,700. For all debit cards, the corresponding figures stood at Rs 3,092 and Rs 1,700.

Bharat QR

Last month, Visa, MasterCard, RuPay and American Express launched the BharatQR an inter-operable QR code payment system for card networks and banks. Around the same time, the Reserve Bank of India (RBI) proposed new slabs for debit card merchant discount rate (MDR) banks will be allowed to charge merchants. It proposed differentiated MDR between acquiring infrastructure involving physical terminals (POS machines, mPOS etc) and digital acceptance infrastructure models (such as QR codes). QR codes payment through cards would attract a fee of 0.3% to 0.85% for merchants. MDR is an inter-bank exchange fee that banks charge for enabling digital transactions. It remains to be seen if BharatQR will increase the usage of debit cards.

Monday, October 21, 2013

A year after the Reserve Bank of India (RBI) announced a cut in charges on debit card transactions, banks
continue to impose a fee of 2.5% for payments at petrol pumps, thereby
making an undue gain at the cost of the consumer. Earlier this month,
large banks thwarted an attempt by the RBI-promoted National Payments Corporation of India (NPCI) from capping charges on debit cards that are part of NPCI's Rupay network.

Last year, RBI asked banks to cap the charges on debit card transactions
at 0.75% for transaction values up to Rs 2,000 and 1% for larger
transactions. But in debit card transactions at petrol pumps, banks
continue to impose a 2.5% surcharge, which are mostly passed on to the
consumer.

Sources said that NPCI had sent a communication to
banks asking them not to charge more than 1% on its Rupay cards. Rupay
cards were introduced by NPCI as India's answer to MasterCard and Visa. Sources said that the move has been stymied by banks who have called for more discussion on the issue.

The 2.5% surcharge has its origins in the days when credit cards were
in their infancy and debit cards non-existent. Typically, when a bank
installs a credit card swipe machine at a retail outlet, its agreement
with the merchant bars any kind of surcharge being passed on to the
customer.

But in the case of petrol pumps and Indian Railways,
an exception was made allowing them to pass on the charges (described by
banks as 'merchant discount rate'), to the customer. The exception was
made to end an impasse where these government entities were refusing
cards on the grounds that their margins were too low to absorb the
credit card charges of 2.5%.

RBI, while slashing charges on
debit cards, had used the rationale that the transaction cost of credit
and debit card should not be identical. This was because credit card
transactions required the bank to provide free credit to the customer
until the monthly bill was issued. The bank also took on the risk of the
customer defaulting on his obligations.

In debit cards, the
money goes straight out of the customer's bank account and the only
expenses are on account of using the network and in respect of security
of transaction. In the West, regulators have already started capping
charges on debit card transactions.

Bankers say that a huge
transformation is taking place in payments as debit card transactions
are set to outstrip payments by credit cards in coming years. In July
2013, banks saw 4.23 crore credit card transactions as against 5.24
crore debit card transactions. In value terms, however, credit card
transactions continue to be higher at Rs 11,038 crore as against Rs
7,722 crore under debit. With the focus now on financial inclusion, the
number of debit cards and set to go even higher.

Saturday, October 19, 2013

A year after the Reserve Bank of India (RBI) announced a cut in charges on debit card transactions, banks
continue to impose a fee of 2.5% for payments at petrol pumps, thereby
making an undue gain at the cost of the consumer. Earlier this month,
large banks thwarted an attempt by the RBI-promoted National Payments Corporation of India (NPCI) from capping charges on debit cards that are part of NPCI's Rupay network.

Last year, RBI asked banks to cap the charges on debit card transactions
at 0.75% for transaction values up to Rs 2,000 and 1% for larger
transactions. But in debit card transactions at petrol pumps, banks
continue to impose a 2.5% surcharge, which are mostly passed on to the
consumer.

Sources said that NPCI had sent a communication to
banks asking them not to charge more than 1% on its Rupay cards. Rupay
cards were introduced by NPCI as India's answer to MasterCard and Visa. Sources said that the move has been stymied by banks who have called for more discussion on the issue.

The 2.5% surcharge has its
origins in the days when credit cards were in their infancy and debit
cards non-existent. Typically, when a bank installs a credit card swipe
machine at a retail outlet, its agreement with the merchant bars any
kind of surcharge being passed on to the customer.

But in the
case of petrol pumps and Indian Railways, an exception was made allowing
them to pass on the charges (described by banks as 'merchant discount
rate'), to the customer. The exception was made to end an impasse where
these government entities were refusing cards on the grounds that their
margins were too low to absorb the credit card charges of 2.5%.

RBI, while slashing charges on debit cards, had used the rationale that
the transaction cost of credit and debit card should not be identical.
This was because credit card transactions required the bank to provide
free credit to the customer until the monthly bill was issued. The bank
also took on the risk of the customer defaulting on his obligations.

In debit cards, the money goes straight out of the customer's bank
account and the only expenses are on account of using the network and in
respect of security of transaction. In the West, regulators have
already started capping charges on debit card transactions.

Bankers say that a huge transformation is taking place in payments as
debit card transactions are set to outstrip payments by credit cards in
coming years. In July 2013, banks saw 4.23 crore credit card
transactions as against 5.24 crore debit card transactions. In value
terms, however, credit card transactions continue to be higher at Rs
11,038 crore as against Rs 7,722 crore under debit. With the focus now
on financial inclusion, the number of debit cards and set to go even
higher.